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In retrospect, everything is always easy. Today, everyone knows that the new market was massively overvalued. can also be about the crash of the solar stocks today easily say “Sure were overvalued at the price-earnings ratio”. But Facebook is then valued at a PE ratio of around 70 in fiscal year 2014?

The share of Beate Uhse AG was oversubscribed 64 times with the introduction in 1999, but has since lost massively in value.

Contents[hide]

Overvalued stocks

In theory, everything is simple

These data help in finding

How do I recognize the future potential?

Worth searching at all

Conclusion

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OVERVALUED STOCKS

KGV as an indication

Often Hot Stocks

Also, bad future prospects as a reason for overvaluation

Efficient market hypothesis denies overvaluation

IN THEORY, EVERYTHING IS SIMPLE

Especially in the Value strategies play categories such as undervalued or overvalued a major role. Behind this is the recognition that the value of a stock is measured in the profits of the company in the long term. In the short term shares may Read in-depth etoro review before start trading rise though, although the company is losing money, but in the long term only profitable companies can pay high dividends and offer gains.

For this, however, investors have one hand assess the current situation of the company, on the other hand, the future prospects. If the price is relatively low, although both are good, the company is undervalued, the course despite poor data is high, the stock is overvalued and should be sold as soon as possible.

Overrated is a stock when the price compared to the potential is too high

THESE DATA HELP IN FINDING

A few data will help to get a first impression of the price of the stock. Perhaps the best-known indicator is the price-earnings ratio (PER), it indicates that Wievielfache of the profit has to be paid for the stock. The higher the price-earnings ratio, the more expensive the stock.

Had corporate profits stable, the observation at this point would be almost over. At best, one would have to take a look at the dividend yield, ie the amount of the dividend per 100 euros investment. Depending on whether you prefer a regular payout well researched plus500 review or reinvestment, you could then choose stocks with similar price-earnings ratio with a high or low dividend yield. The price-earnings ratio would still like high because stocks with low price-earnings ratio would rise in the course, such a high fall until all shares have similar price-earnings ratio.

Price-earnings ratio selected shares in 2014. Source: Own graph with data from OnVista.

But in practice, a company such as the electricity supplier RWE prospects other than, say, Facebook . This is also reflected in different price-earnings ratio down, because what use current high profits when on sale in the profit and loss account as early as next year, a loss?

The price-earnings ratio is an important indicator in finding overvalued stocks, but alone is not a reliable measure.

HOW DO I RECOGNIZE THE FUTURE POTENTIAL?

For the future of a company, there is little meaningful data. The price-to-cash flow ratio may say something about the ability to invest. In addition to winning also the depreciation is taken into account, the cash flow is therefore the profit + depreciation. For although the recognized in the balance sheet impairment reduced profit, but it means no outflow of capital. Therefore, this money is for new investments available.

But what use is a lot of money in the war chest if it operates on a non-promising market, or has a bad management? For a glimpse into the future, it therefore needs imagination. You should also familiarize yourself with the news about the company and the corresponding market. Well it is if you know the product itself. Tesla is a threat to BMW and Co or the manufacturer goes the way of the DeLorean Motor Company LTD? That carmaker whose car early 1980s much attention excited (and immortalized in 1985 in “Back to the Future” as a time machine), but it was insolvent after less than two years despite millions subsidies the British government? Knows best who the car knows, DeLorean went example, not only because of the high price,

On the future prospects of a business, there are few data from experience. The quality of management, the product and the market environment play a major role

WORTH SEARCHING AT ALL

Finding overvalued stocks is therefore difficult panaceas do not exist. But it may be worth first look at fundamental data to throw as the PER and then to ask the question whether the price is justified. Especially hot stocks , so fashion stocks are often overvalued. For many investors hope for a new success story à la Google, just think of the many failed hopefuls as Kabel New Media and Solarworld. But also very classic, boring stocks may be too expensive.

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